England is Mollycoddling Scotland into Sclerosis

For Scots who grew up in the Sixties, one ritual, enacted throughout the country, encapsulated their experience of a society excessively dependent on the state. Families gathered weekly outside municipal buildings to read the notices revealing who had been allocated a new council house. Those huddles symbolised the patronising authoritarianism with which governments sought to plan Scotland out of poverty.

Public housing dominated to such an extent that Scottish building societies were net exporters of capital. Meanwhile overdependence on the state for jobs as well as accommodation nurtured paucity of aspiration. By the late 1980s it was accepted, even by Scottish Labour leaders, that excessive state provision had restricted labour mobility, depressed growth and promoted the spurious security that encouraged industrial militancy.

But devolved government was born into a new political consensus. It was time to abandon Caledonian Butskellism. Shrinkage of the state was needed to close the gap between Scottish and UK economic performance. There would be a bonfire of the quangos and promotion of enterprise. The Scottish state would withdraw from activity in which it was superfluous and concentrate on delivering better services.

The failure of the services agenda is well known. Scotland receives sufficient subsidy to spend more on public services than any other part of the UK but delivers dismal results. That caused the Prime Minister vivid embarrassment during the election campaign. But the full extent of Holyrood’s failure was exposed this week by the results of an investigation by the Glasgow Herald. Scotland now has the largest public sector in the developed world. One in four workers is employed by the state, and the size of the national bureaucracy grew by 11,000 jobs last year alone. Administrative appointments outstripped frontline jobs by a ratio of four to one. Public sector salaries cost an additional £1bn.

In Britain public spending represents 41 per cent of GDP, and last year’s economic growth rate was 3.1 per cent. In Scotland, public spending was 54 per cent of GDP and growth was just 1.9 per cent. These facts are connected. Every first minister since Donald Dewar has linked reduced bureaucracy to enhanced economic performance. The present incumbent, Jack McConnell, promised to cut jobs he describes as ‘a drain’ on economic growth. The embarrassment is that the opposite is happening. McConnell’s promise was made while those 11,000 new jobs were being added to the wage bill.

Unreconstructed Thatcherites regard this as the inevitable consequence of devolution. They warned that Scottish Labour would use power to offer lucrative sinecures to its supporters. The reality is more nuanced. Some blame for this frenzy of cronyism belongs in No 11 Downing Street. Another portion attaches to the speed with which Scotland has become disillusioned with devolved government.

In every year since 1999, funding settlements above the rate of inflation have given the Scottish Executive more money than it can spend. Finance ministers face an annual obligation to explain budget surpluses of several hundred million pounds because, rather than await a consensus on the need for reform of Scottish public services, Chancellor Brown has reinforced his power base by giving first and hoping for modernisation afterwards. The results are predictable in a country where trade unions strenuously oppose even modest market-oriented reform. Investment is squandered to expand the state, not modernise it.

Institutional inertia has been reinforced by the bunker mentality in the Scottish Parliament. Whenever a problem arises, MSPs create a new quango rather than risk taking a decision themselves. Six years into home rule they are trapped in a vicious spiral in which public disappointment with their performance makes them increasingly reluctant to perform at all.

There are lessons for the rest of Britain. Spending linked ruthlessly to reform may be imperfect, but Scotland has tested the alternative to destruction. More distressing is the indisputable evidence that the investment that crosses the Scottish border with each public spending round is doing more harm than good. England is not just featherbedding Scotland. It is mollycoddling this country into sclerosis. For Holyrood to begin to impress, MSPs must face complex decisions and prove their willingness to act decisively. Gordon Brown would help them if he cut the Scottish budget. Lavish subsidy is undermining confidence in Scotland’s constitutional settlement as well as its economy.